Federal Reserve Credit jumped $19.1bn to a record $2.438 TN (13-wk gain of $157bn). Fed Credit was up $207bn from a year ago (9.3%). Elsewhere, Fed Foreign Holdings of Treasury, Agency Debt this past week (ended 2/4) increased $4.8bn to a record $3.356 TN. "Custody holdings" were up $409bn from a year ago, or 13.9%.

Total Commercial Paper outstanding increased $7.8bn to $996 billion. CP was down $126bn y-o-y, or 11.3%.

Global central bank "international reserve assets" (excluding gold) - as tallied by Bloomberg – were up $1.457 TN y-o-y, or 18.6%, to a record $9.271 TN.

Global Credit Market Watch:

January 31 – Bloomberg (Michael Patterson and Ron Harui): “Money-market rates in developing nations are increasing at the fastest pace since 2008 as central banks from China to Brazil lift borrowing costs and banks hoard cash on concern unrest in Egypt may destabilize the Middle East. The yield on JPMorgan Chase & Co.’s ELMI+ Index of short- term debt in emerging markets rose to 2.5% on Jan. 28, from a record-low 1.74% on Dec. 31.”

February 2 – Bloomberg (Jody Shenn and Prashant Gopal): “Home loans that inflated the U.S. housing bubble by giving borrowers the choice of cutting interest payments in exchange for higher balances are fueling the fastest gains in the mortgage-bond market. Prices for senior bonds tied to option adjustable-rate mortgages, called ‘toxic’ by a government commission, typically jumped 6 cents to 64 cents on the dollar in the past month… Option-ARM debt tumbled to as low as 33 cents in 2009.”

February 1 – Bloomberg (Tim Catts): “The lowest-rated corporate borrowers face mounting bond and loan maturities over the next five years even as speculative-grade issuers slash their debt, according to Moody’s… Companies ranked Caa1 or lower have about $130 billion of bonds and loans coming due through 2015, up 8% from a year ago… Debt maturing during that period at all high-yield, high-risk borrowers fell about $100 billion to $690 billion, analysts led by Kevin Cassidy wrote…”

Global Bubble Watch:

February 2 – Financial Times (Michael Mackenzie): “The Federal Reserve has surpassed China as the leading holder of US Treasury securities even though it has yet to reach the halfway mark in its latest round of quantitative easing… … the New York Fed’s holdings of Treasuries in its System Open Market Account, known as Soma, total $1,108bn, made up of bills, notes, bonds and Treasury Inflation Protected Securities, or Tips. … China holds $896bn and Japan owns $877bn. ‘By June [the Fed] will have accumulated some $1,600bn of Treasury securities, likely to be in the vicinity of China and Japan’s combined holdings,’ said Richard Gilhooly, a strategist at TD Securities.”

February 4 – Bloomberg (Masahiro Hidaka): “Japan is in a ‘bond bubble’ that may burst in a few years if the government doesn’t increase taxes to cut its debt burden, said Masayuki Matsushima, a former executive director at the Bank of Japan. Any collapse of the bubble would boost long-term borrowing costs and lengthen the time it takes for the government to fix its finances, Matsushima, currently the Japan chairman of Credit Suisse Group AG in Tokyo, told reporters…”

Muni Watch:

February 3 – Bloomberg (Brendan A. McGrail and Matt Robinson): “Municipal bondholders in January unloaded assets at the fastest daily pace in at least 14 years as record mutual fund redemptions and speculation of widespread defaults drove tax-exempt yields to a 19-month high. Bondholders sought buyers for an average $838 million in municipal securities daily from Jan. 3 through Feb. 1, the most on record… Sellers wanted bids for $783 million on average in March 2008, the second-highest daily tally, following the demise of the auction-rate securities market. ‘We are raining bids-wanted right now,’ said Bud Byrnes, chief executive officer of… RH Investment Corp. ‘The market is all over the place. It’s not a happy time in the market.’”

February 4 – Bloomberg (Brendan A. McGrail and Matt Robinson): “Sales of municipal bonds this week plummeted to a five-month low as issuers hesitated to come to market amid the steepest interest-rate rise since 2009. States and municipalities offered about $3.27 billion in fixed-rate debt this week…”

February 2 – Bloomberg (Darrell Preston): “New Jersey Governor Chris Christie said he doesn’t mind breaking promises to pensioners to close a $10.5 billion budget deficit -- even if they sue. ‘I have bigger issues than who sues me,’ said Christie… who wants to end cost-of-living increases for retirees. ‘Get in line.’ Public workers in Colorado, South Dakota and Minnesota are already suing their states, which are among 18 that want to pare pension costs by increasing employee contributions, raising the retirement age or curbing cost-of-living increases.”

Currency Watch:

The U.S. dollar index slipped 0.1% to 78.04 (down 1.3%). On the upside for the week, the Australia dollar increased 2.0%, the Mexican peso 1.8%, the British pound 1.6%, the Canadian dollar 1.4%, the Norwegian krone 1.1%, the South Korean won 1.0%, the Singapore dollar 0.8%, the Swedish krona 0.7%, and the Brazilian real 0.6%. On the downside, the Swiss franc declined 1.4%, the South African rand 1.0%, the New Zealand dollar 0.5%, the Danish krone 0.2%, the Euro 0.2%, and the Japanese yen 0.1%.

Commodities and Food Watch:

February 3 – Bloomberg (Tony C. Dreibus): “World food prices rose to a record in January on higher dairy, sugar and cereal costs and probably will remain elevated, the United Nations said. An index of 55 food commodities climbed 3.4% from December to 231 points, the seventh straight increase… Dairy prices led advances among five food categories, rising 6.2%...”

February 4 – Bloomberg (Phoebe Sedgman): “New Zealand wool prices may surge as much as 25% in the next two years as China, the biggest buyer, boosts stockpiles on expectations supply will remain crimped, according to a wool broking group. Crossbred wool prices, which have more than doubled since July 2009, reached about NZ$5.60 ($4.33) a kilogram at auction yesterday in Christchurch…”

February 2 – Financial Times (Leslie Hook and Jack Farchy): “China’s gold imports are estimated to have more than doubled from a year ago in the run-up to Chinese new year, putting the country on track to overtake India as the world’s largest consumer of the precious metal. The growth in demand is being attributed in part to Chinese families giving each other gifts of gold instead of traditional red envelopes filled with cash. Fears of inflation have also driven demand for gold as a retail investment. Precious metals traders in London and Hong Kong said… they were stunned by the strength of Chinese buying in the past month. ‘The demand is unbelievable. The size of the orders is enormous,’ said one senior banker, who estimated that China had imported about 200 tonnes in three months.”

Asia Bubble Watch:

February 1 – Bloomberg (Eunkyung Seo and William Sim): “South Korean inflation accelerated more than forecast in January, breaching the central bank’s 4% ceiling and adding to the case for another increase in borrowing costs as early as next week. The consumer-price index rose 4.1% from a year earlier, after gaining 3.5% in December…”

February 4 – Bloomberg (Widya Utami and Novrida Manurung): “Indonesia’s central bank unexpectedly raised its benchmark interest rate for the first time in more than two years after inflation climbed to a 21-month high. The central bank increased its reference rate by a quarter percentage point, to 6.75%...”

Latin America Watch:

February 4 – Bloomberg (Alexander Emery): “Peruvian bank lending will grow as much as 20% this year, said Alvaro Correa, chief financial officer of financial holding company Credicorp Ltd. Slowing economic growth may curb loans this year after overall lending jumped 24% in 2010…”

Unbalanced Global Economy Watch:

February 4 – Bloomberg (Greg Quinn): “Canadian job creation was more than four times what economists predicted in January… Employment rose by 69,200 and the labor force increased by 106,400… The jobless rate rose to 7.8% from December’s 7.6%.”

February 2 – Bloomberg (Jeff Black): “Germans feel prices are rising almost twice as fast as the official rate, fueling wage demands and making it harder for the European Central Bank to keep a rein on inflation, according to UniCredit Bank AG. … so-called ‘perceived inflation’ jumped to 3.3% in December compared with Germany’s official rate of 1.7%. UniCredit calculates perceived inflation by giving greater weight to the goods people buy most often, such as fuel, food and clothing. ‘The rise in perceived inflation increases the likelihood of higher wage demands,’ said Alexander Koch, an economist at UniCredit… ‘An excessive round of wage increases would certainly make the ECB nervous.’”

U.S. Bubble Economy Watch:

February 2 – Bloomberg (Barbara Powell): “U.S. gasoline at the pump may rise 13% by May as crude oil in New York tops $100 a barrel… according to analysts… The highest price for regular gasoline this year will be $3.50 a gallon, based on the median estimate of 14 analysts. The motor fuel hasn’t reached that level since Oct. 6, 2008, according to AAA, the nation’s largest motoring organization.”

Central Banking Watch:

February 1 – Dow Jones (Anthony Harrup): “Mexican billionaire Carlos Slim, considered last year by Forbes as the world's richest man, said… that loose U.S. monetary policy that has allowed the dollar to weaken against other currencies is ‘mistaken’ as it causes commodities prices to rise and affects other countries. Asked about the effects of a stronger Mexican peso against the U.S. currency, Slim said the problem ‘isn't that the peso is appreciating, it's that the dollar is devaluing with a clear, I would say aggressive, policy of the U.S. government.’ … Lack of confidence in the dollar is pushing up commodities prices, such as grains, with ‘social consequences everywhere.’ Higher metals prices--copper, steel and others--are causing underlying inflation pressures, he said.”

February 4 – Bloomberg (Jennifer Ryan): “Bank of England official Andrew Sentance’s drive for higher interest rates to tame inflation may gain traction at next week’s policy meeting after reports indicated the U.K. recovery has reignited.”

New York Watch:

February 4 – Bloomberg (Michael Quint): “Governor Andrew Cuomo plans to pay part of New York’s pension contributions with $884 million of IOUs, joining California’s Orange County in borrowing to meet retirement costs… The… governor… included the IOUs that pay 5% interest in his $132.9 billion budget, which he said closed a $10 billion deficit without borrowing.

Disclaimer:

Doug Noland is not a financial advisor nor is he providing investment services. This blog does not provide investment advice and Doug Noland's comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. The Credit Bubble Bulletins are copyrighted. Doug's writings can be reproduced and retransmitted so long as a link to his blog is provided.